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Electricity pricing, capacity, and predictive maintenance considering reliability

Author

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  • Yu-Chung Tsao

    (National Taiwan University of Science and Technology
    National Taiwan University of Science and Technology
    Asia University
    China Medical University Hospital, China Medical University)

  • Thuy-Linh Vu

    (National Taiwan University of Science and Technology
    National Taiwan University of Science and Technology)

Abstract

Operations and maintenance management for renewable energy (RE) projects has become increasingly important in improving energy system models’ precision. Specifically, some elements are uncertain and difficult to predict, such as temperature conditions or system reliability, and these result in more complicated RE projects. Suitable maintenance and insurance policies are vital to reduce risks for RE system operators. This paper formulates a profit model that integrates system reliability, predictive maintenance, and green insurance into electricity pricing and capacity problems. A non-linear optimization solution procedure is proposed to determine the optimal electricity price, capacity, investment plan, predictive maintenance budget, and insurance level while maximizing company profit. The theoretical results indicate that RE systems’ increased reliability decreases the insurance level. However, an increase in the insurance level decreases RE project investments. Therefore, companies can attract more investments for RE projects if RE system reliability increases while insurance costs decrease. Additionally, this work not only presents a numerical analysis with examples and a sensitivity analysis to illustrate the model, but also discusses the opportunities this work offers for managers and analysts in practice.

Suggested Citation

  • Yu-Chung Tsao & Thuy-Linh Vu, 2023. "Electricity pricing, capacity, and predictive maintenance considering reliability," Annals of Operations Research, Springer, vol. 322(2), pages 991-1011, March.
    • Handle: RePEc:spr:annopr:v:322:y:2023:i:2:d:10.1007_s10479-023-05164-1
    DOI: 10.1007/s10479-023-05164-1
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    References listed on IDEAS

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    Cited by:

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    2. McMorland, J. & Collu, M. & McMillan, D. & Carroll, J. & Coraddu, A., 2023. "Opportunistic maintenance for offshore wind: A review and proposal of future framework," Renewable and Sustainable Energy Reviews, Elsevier, vol. 184(C).

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